1 Operations Operations Management Management Operations and Operations and Productivity Productivity Chapter 1 Chapter 1
Dec 19, 2015
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Operations Operations ManagementManagement
Operations and ProductivityOperations and ProductivityChapter 1Chapter 1
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OutlineOutline Global company profileGlobal company profile What is Operations Management?What is Operations Management?
• The heritage of Operations ManagementThe heritage of Operations Management• Why study OM?Why study OM?• What Operations Managers doWhat Operations Managers do
Organizing to produce goods and servicesOrganizing to produce goods and services Where are the OM jobs?Where are the OM jobs?
• Exciting new trends in Operations Exciting new trends in Operations ManagementManagement
Operations in the service sectorOperations in the service sector The Productivity challengeThe Productivity challenge
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Learning ObjectivesLearning ObjectivesWhen you complete this chapter, you When you complete this chapter, you
should be able to:should be able to: Identify or DefineIdentify or Define::
• Production and productivityProduction and productivity• Operations Management (OM)Operations Management (OM)• What operations managers doWhat operations managers do• ServicesServices
Describe or Explain:Describe or Explain:• A brief history of operations A brief history of operations
managementmanagement• The future of the disciplineThe future of the discipline• Measuring productivityMeasuring productivity
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What Is Operations Management?What Is Operations Management?
Operations management Operations management is the is the business function that manages business function that manages that part of a business that that part of a business that transforms raw materials and transforms raw materials and human inputs into goods and human inputs into goods and services of higher value.services of higher value.
ProductionProduction is the creation of goods is the creation of goods and servicesand services
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Significant Events in OMSignificant Events in OM
Division of labor (Smith, 1776)Division of labor (Smith, 1776) Standardized parts (Whitney, 1800)Standardized parts (Whitney, 1800) Scientific management (Taylor, 1881)Scientific management (Taylor, 1881) Coordinated assembly line (Ford 1913)Coordinated assembly line (Ford 1913) Gantt charts (Gantt, 1916)Gantt charts (Gantt, 1916) Motion study (the Gilbreths, 1922)Motion study (the Gilbreths, 1922) Quality control (Shewhart, 1924)Quality control (Shewhart, 1924)
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Significant EventsSignificant Events
CPM/PERT (Dupont, 1957)CPM/PERT (Dupont, 1957) MRP (Orlicky, 1960)MRP (Orlicky, 1960) CADCAD Flexible manufacturing systems (FMS)Flexible manufacturing systems (FMS) Manufacturing automation protocol Manufacturing automation protocol
(MAP)(MAP) Computer integrated manufacturing Computer integrated manufacturing
(CIM)(CIM)
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The importance of OMThe importance of OM For any organization are necessary For any organization are necessary
three basic functions (three basic functions (marketing, marketing, finance, and operationsfinance, and operations).).
How goods and services are How goods and services are produced?produced?
OM is such a costly part of an OM is such a costly part of an organizationorganization
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The Work of OMThe Work of OM
PlanPlan OrganizeOrganize StaffStaff LeadLead ControlControl
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Ten Critical DecisionsTen Critical Decisions Service, product designService, product design Quality managementQuality management Process, capacity designProcess, capacity design LocationLocation Layout designLayout design Human resources, job design.Human resources, job design. Supply-chain managementSupply-chain management Inventory management Inventory management SchedulingScheduling MaintenanceMaintenance
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Organizational FunctionsOrganizational Functions
MarketingMarketing•Need to get customers to sell the Need to get customers to sell the
products and offer servicesproducts and offer services OperationsOperations
•Need to create goods and servicesNeed to create goods and services Finance/AccountingFinance/Accounting
• Improvement of benefitsImprovement of benefits
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Where Are the OM Jobs?Where Are the OM Jobs? Technology/methodsTechnology/methods Facilities/space utilizationFacilities/space utilization Strategic issuesStrategic issues Response timeResponse time People/team developmentPeople/team development Customer serviceCustomer service QualityQuality Cost reductionCost reduction Inventory reductionInventory reduction Productivity improvementProductivity improvement
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New Challenges in OMNew Challenges in OM
Local or national Local or national focusfocus
Batch shipmentsBatch shipments Low bid purchasingLow bid purchasing
Lengthy product Lengthy product developmentdevelopment
Standard productsStandard products Job specializationJob specialization
Global focusGlobal focus Need to produce on Need to produce on
time goods and time goods and servicesservices
Supply chain Supply chain partneringpartnering
Rapid product Rapid product development, development, alliancesalliances
Mass customizationMass customization Empowered Empowered
employees, teamsemployees, teams
FromFrom ToTo
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Goods Versus ServicesGoods Versus ServicesDEFINITION DEFINITION
GOODS: Any company generates a GOODS: Any company generates a tangible product that customers usetangible product that customers use• For example a car is produced by a For example a car is produced by a
company and is sold afterwards. company and is sold afterwards. SERVICES:Any company offers a SERVICES:Any company offers a
intangible output to the customers intangible output to the customers • For example a company offers internet For example a company offers internet
service.service.
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Goods Versus ServicesGoods Versus Services
Tangible productTangible product Can be resoldCan be resold Can be Can be
inventoriedinventoried
Some aspects of Some aspects of quality quality measurablemeasurable
Selling is distinct Selling is distinct from productionfrom production
Intangible Intangible ProductProduct
Reselling unusualReselling unusual Difficult to Difficult to
inventoryinventory Quality difficult Quality difficult
to measureto measure Selling is part of Selling is part of
serviceservice
GoodsGoods ServiceService
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Goods Versus Services - Goods Versus Services - ContinuedContinued
Product is Product is transportabletransportable
Site of facility Site of facility important for costimportant for cost
Often easy to Often easy to automateautomate
Revenue generated Revenue generated primarily from primarily from tangible producttangible product
Provider, not Provider, not product is product is transportabletransportable
Site of facility Site of facility important for important for customer contactcustomer contact
Often difficult to Often difficult to automateautomate
Revenue generated Revenue generated primarily from primarily from intangibleintangible service. service.
GoodsGoods ServiceService
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The Economic System The Economic System Transforms Inputs to OutputsTransforms Inputs to Outputs
The economic system transforms inputs to outputs
Land, Labor, Capital, Management
Goods and Services
Feedback loop
Inputs Process Outputs
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Measure of process improvementMeasure of process improvement Represents output relative to inputRepresents output relative to input
Productivity increases improve Productivity increases improve standard of living standard of living
From 1889 to 1973, U.S. productivity From 1889 to 1973, U.S. productivity increased at a 2.5% annual rateincreased at a 2.5% annual rate
ProductivityProductivity
ProductivityProductivityProductivityProductivity UnitsUnits producedproducedUnitsUnits producedproducedInput usedInput usedInput usedInput used= = = =
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Measurement ProblemsMeasurement Problems
QualityQuality may change while the may change while the quantity of inputs and outputs quantity of inputs and outputs remains constantremains constant
External elementsExternal elements may cause an may cause an increase or decrease in productivityincrease or decrease in productivity
Precise unitsPrecise units of measure may be of measure may be lackinglacking
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Productivity VariablesProductivity Variables
LaborLabor - contributes about 10% of the - contributes about 10% of the annual increaseannual increase
CapitalCapital - contributes about 32% of - contributes about 32% of the annual increasethe annual increase
ManagementManagement - contributes about - contributes about 52% of the annual increase52% of the annual increase
2020
Jobs in the U.SJobs in the U.S
26%
18%
16%
14%
6%6% 5% 5%
3%1%
Education, Health, etc.
Manufacturing
Retail Trade
State & Local Gov't
Finance, Insurance
Wholesale Trade
Transport, Public Util.
Construction
Federal Government
Mining
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Productivity Growth 1971- 1992Productivity Growth 1971- 1992
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
5
United StatesWest GermanyJapan
Whole Economy Manufacturing
% p
er y
ear
LaborLabor
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Service ProductivityService Productivity
Typically labor intensiveTypically labor intensive Frequently individually processedFrequently individually processed Often an intellectual task performed Often an intellectual task performed
by professionalsby professionals Often difficult to mechanizeOften difficult to mechanize Often difficult to evaluate for qualityOften difficult to evaluate for quality